The Asian Century 22.

            Communism trapped China in isolation, poverty, and mass death.  State-sponsored capitalism has turned China into the second largest economy in the world and raised hundreds of millions of people out of abject poverty.  Jack Ma, founder of Alibaba, is very much what once would have been called a “capitalist roader.”   Ma believes that hard work and lots of it will pave China’s road to success.  He is the personification of China’s post-Mao development strategy.  To paraphrase Charlie Wilson, “What’s good for China is good for Jack Ma, and vice versa.”[1] 

            Except many young Chinese have their doubts.[2]  Many Chinese have not kept pace during China’s race to wealth.[3]  The work-load in some parts of the economy is killing: 12 hours a day, 6 days a week.  In these circumstances, Mao’s belief in “constant class struggle between the oppressed and their oppressors,” which contributed to the coming of the “Great Proletarian Cultural Revolution,” has a renewed appeal.  People have begun to denounce “exploitation and meaningless striving.”  They post on-line slogans announcing their belief that “Dying for the country?  Yes.  Dying for the capitalists?  Never.”  They describe themselves as “wage slaves” and “corporate cattle.”  They denounce Jack Ma as the human face of a whole system: “Workers are only money-making tools for people like him.”  They also criticize the Communist Party for having tilted too far in favor of the capitalists.  In these conditions, “The Selected Works of Mao Zedong” has become again a best-seller.  This time, it is also being closely read and often quoted. 

All the evidence is that Zi Jinping got there first.  China’s internet is tightly censored.[4]  Yet the torrents of complaint against the capitalists, which go as far as calls for physical elimination, flow unchecked.  Jack Ma himself abruptly disappeared from public view in Fall 2020.  Whether these measures, along with Zi’s campaign of nationalism and stifling Western ideas, will be enough to calm the waves is an open question. 

What’s missing in the nostalgic Maoist analysis?  Two things.  First, China doesn’t have any independent labor unions to bargain with employers.[5]  If such unions did exist, Chinese workers would rush to join.  Massive strikes would follow.  Second, China doesn’t have a two party political system.  There is no party with a vested interest in promoting redistributive policies.  If such a party did exist, voters would flock to it.  Wealth inequality would be blunted. 

It is hard to avoid the conclusion that a fundamental contradiction exists between the Communist Party’s monopoly of power and the needs of the workers.[6] 


[1] On Charles Wilson, not the Charlie Wilson of the movie, see: https://en.wikipedia.org/wiki/Charles_Erwin_Wilson 

[2] Li Yuan, “China’s Youth Are Turning to Mao,” NYT, 10 July 2021.  See also https://waroftheworldblog.com/2021/07/07/the-asian-century-21/ 

[3] On income inequality in China, compared with in the United States and France, see: https://blogs.lse.ac.uk/businessreview/2019/04/01/income-inequality-is-growing-fast-in-china-and-making-it-look-more-like-the-us/ 

[4] On the “Great Firewall of China,” see: https://en.wikipedia.org/wiki/Great_Firewall 

[5] OK, neither does the United States.  Labor unions grew so obstructive in economic hard times that companies shipped lots of jobs to “right to work” states and automated many more.  However, they now go out of their way not to vex their workers so that those workers don’t vote to join a union.  See the recent vote by Amazon workers in Alabama not to join the Teamsters as one example.  See: https://waroftheworldblog.com/2015/03/02/american-union-stay-away-from-me-uh/ 

[6] I had a student once who described Lenin “speaking in a Marxist dialect.” 

The Asian Century 21.

            Even a stopped clock is right twice a day.  The descendant of Albanian immigrants to Italy, the son of a father disgraced and imprisoned for embezzlement, born with a body that betrayed him early in life and killed him in middle-age, and resident one of Italy’s many impoverished areas, Antonio Gramsci (1891-1937) grew up just about as hard as was possible.  On the other hand he showed himself a brilliant student with wide-ranging interests.  In full revolt against a God who had condemned him to personal misery and a society that condemned the poor to social misery, Gramsci became a revolutionary socialist and then, after the First World War, a Communist.  The Italian elites preferred a Fascist policeman to a Communist revolution on the horrifying Russian model.  Once Benito Mussolini took power, the Italian left received a savage hammering.  Gramsci spent the last eleven years of his life in prison. 

At least it gave him time to think and write.  He filled thirty notebooks with his thoughts on a wide range of issues.  Gramsci’s ideas continue to exert influence today.  One of his ideas advanced the role of what is called “cultural hegemony.”  Traditionally, Marxists portrayed the bourgeoisie as retaining power through force.  Gramsci creatively extended this explanation by arguing that the bourgeoisie also retained power by propagandizing their values and culture to the rest of society as normal.  The schools and newspapers, the church(es), the newspapers and book publishers, and today he would add movie studios, television networks, and hip-hop music all propagate the values of the “hegemonic culture” of the established order.  In short, any alternative to the established system could not be legitimate.[1] 

Why do his ideas matter today?  Well, look at the contemporary People’s Republic of China (PRC).[2]  Since taking power in 2012, Xi Jinping has worked in a sustained way to entrench what has been called “Neo-Maoism” as the only thinkable way forward for China.  Partly this involves cultivating an image of Xi as a beneficent ruler who is promoting prosperity, making government more responsive to citizen needs, and rooting out endemic corruption.    

He also has launched a brutal repression of anyone who challenges the government or the “status quo” it represents.  Civil rights activists, defenders of the rule of law, aspiring union organizers, dissident intellectuals and artists, Christians and Muslims have all been persecuted.  Rigged trials, judicial and punitive torture, and administrative imprisonment have been reported.    

Most significantly, however, Xi has worked to limit and shape what Chinese people can know and believe.  He has banned serious study of the era of Mao Zedong as “historical nihilism.”  The schools teach a “George Washington chopped down the cherry tree” version of recent Chinese history.  The government has been creating a “social credit” system to grade (i.e. reward or punish) individuals for how well they conform to government-defined social norms.[3]  The internet is closely watched and increasingly tightly controlled.  “Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era” has become the official, “normal,” and hegemonic thought.  Gramsci’s probably going “See, I told you so.” 


[1] I can’t recall a good biography of Gramsci.  I read some of his stuff in graduate school and rejected it out of hand.  More recently, I have come to take a different view.   Same goes for Noam Chomsky and Herbert Marcuse.  My reading of them, I mean, not their attitude toward Gramsci.  Not that I want Elizabeth Warren writing the tax laws. 

[2] Andrew Nathan, “An Anxious 100th Birthday for China’s Communist Party,” WSJ, 26-27 June 2021. 

[3] See: https://en.wikipedia.org/wiki/Social_Credit_System 

The Asian Century 20.

            Not so long ago, European hopes for a partnership with China looked promising.  At Davos in 2017, Xi Jinping said all the right things about wanting to combat climate change, continue building an open world economy, and working co-operatively with other nations to solve shared problems.  This made an appealing contrast to the Trump Administration’s “America First” stance.  The “China Market” offered both a growing market for high-end European products and cheap source the consumer goods.  China’s “Belt and Road” initiative dangled generous infrastructure spending before countries still struggling out of the financial crisis and recession of the first years of the 21st Century.[1]  European-Chinese co-operation looked like a low-cost or no-cost policy option. 

            Then the Chinese-American split came out into the open.  Then China’s authoritarianism became too blatant to ignore, with the persecution of the Uighurs and the crack-down on democracy in Hong Kong.  Then China started throwing its weight around in Europe to stave off criticism or coerce compliance. 

            Now, the deepening rivalry between the United States and the Peoples Republic of China is forcing other countries to choose sides.  They can back the US, or back China, or try for non-aligned independence.[2]    

            Some in the European Union (EU) want to back the US.  For exponents of an up-dated “Atlantic Alliance,” the US is the only choice: both countries uphold the same values and the US possesses formidable military and diplomatic power.  They choose to see Donald Trump as a destructive anomaly.  They argue that neither the US nor the EU are strong enough alone to counter the PRC, but together than can win.[3] 

One problem here is that the EU is crumbling.  The divide between the original founder countries of the EU and the later additions has surfaced with “Brexit” and the dissent of some of the Eastern Europeans from Franco-German leadership.  The divide between Northern and Southern Europeans revealed by the financial crisis has only been papered over, not solved. 

Others clearly want to pursue non-alignment in a manner that will enable them to hold the ring between the US and the PRC.  Gaining this kind of power involves closer ties with Russia.  Russia has greater military power than do the European countries; Russia has abundant oil and gas flowing to Europe through its pipelines.  The EU and Russia would make a far more impressive bloc than does the EU alone. 

One problem here is that Russia will exact a high price for its co-operation.  Europeans might be willing to see Russia restore order a la Putin to the kleptocratic Ukraine.  How would they deal with Russian irredentism around its Western and Southern frontiers?  Then, Chinese dissidents end up in prison.  Russian dissidents end up dead. 

            Is “Europe” too divided, weak, and even misguided, to chart an independent course in the world? 


[1] Chinese management’s reform of half of the shipping facilities of the Piraeus probably delighted Northern Europeans fed up with Greek sloth, fraud, and incompetence. 

[2] Yaroslav Trofimov, “Europe’s Face-Off With China,” WSJ, 29 February-1 March 2020. 

[3] You can see this as Pessimistic in that it implies that the PRC has already gained so much strength that the US alone cannot check China’s course.  Or perhaps it’s just Realistic. 

The Asian Century 19.

            The Trump Administration decided to deal with the puzzle of how to manage the ascent of the Peoples Republic of China by hammering the living daylights out of China.[1]  China runs a big trade surplus with the United States, so Trump slammed on heavy tariffs.  The payment asymmetry meant that the Chinese could never hurt the United States as much by reciprocating. 

China has long-standing claims on Taiwan, now a more or less democratic and economically successful country of its own.  The Trump Administration diverged from long-standing American policy on Taiwan by warming up to it. 

China has been extending claims over the South China Sea, notably by turning reefs into fortified islands, then claiming the airspace overhead.  The Trump Administration challenged these claims, but also pressed Congress to build up the Navy. 

China has engaged in a long-running struggle for American hearts and minds.  The Trump Administration turned the FBI and Department of Justice loose on Chinese theft of intellectual property; then did the same on China’s efforts to cultivate agents of influence in academia and media. 

            However, the most effective Chinese agents of influence, during the Trump Administration and long before, were American businessmen who profited from the China trade.  They have always argued for “moderation” and “dialogue” in China policy.  Sometimes, President Trump listened to them, as did many of his predecessors.  At times, he seemed to be seeking a “Grand Bargain” with China in which China would mend its ways in return for the United States easing up its pressure.  Any such hopes crashed on the rocks of the Covid-19 pandemic and Trump’s re-election campaign.  The “Kung Flu” line allowed him to blame China for the pandemic without acknowledging his own lackluster response.[2]  American policy on China got tougher during 2016. 

            Tougher didn’t mean more effective.  The Peoples Republic of China continues on the same path as before.  That leaves the Biden Administration with an array of important decisions.  Is “Get Tough With China” the wrong policy?  In that case, one could expect an abandonment of coercion in favor of a return to older policies.  Is “Get Tough With China” the right policy, but it hasn’t had enough time to work yet to change the behavior of such a formidable rival?  In that case, one could expect a continuation of the path we’re on, dressed up with rhetorical distancing from the Trump Administration.  Is “Get Tough With China” the right policy, but the Trump Administration didn’t go far enough?  In that case, one could expect the addition of tight controls on further American investment in China, ugly quarrels in various international organizations, and port-calls by the U.S. Navy all over the region. 

            Other questions naturally follow.  How much stress can either country take?  Does Zi Jinping represent a consensus of Chinese leaders?  If not, how solid is his grip on power? 


[1] Josh Rogin, Chaos Under Heaven: Trump, Xi, and the Battle for the Twenty-First Century (2021), reviewed by Dan Blumenthal, WSJ, 12 May 2021. 

[2] Yet uncertainty remains whether Trump was entirely wrong about the origins of the pandemic.  See: Michael Gordon, Warren P. Strobel, and Drew Hinshaw, “Report on Wuhan Lab Fuels Covid-19 Debate,” WSJ, 24 May 2021; Jeremy Page, Betsy McKay, and Drew Hinshaw, “The Wuhan Lab Leak Debate: Disused Mine at Center Stage,” WSJ, 25 May 2021. 

The Asian Century 18.

            How “hawkish” on China does President Biden want to be?  Between the election and inauguration, observers recognized that the Democratic foreign policy establishment is divided.  On the one hand, there is the global issues[1] faction that deprecates great power competition as a diversion from key future developments.  On the other hand, there are the traditionalists who see a strong United States as the leader in a movement to create a rules-based international order that can shackle “evil doers.”   China would provide a first test of which faction had the upper hand. 

            The Biden administration has moved quickly to confront the Peoples’ Republic of China (PRC).[2]  It invited Taiwan’s chief diplomatic representative to Biden’s inauguration; it announced that it would sell weapons to Taiwan; it fended off a Chinese suggestion of talks in the near future by pleading the need to consult allies; it endorsed the Trump administration’s position that China’s Uighur minority art the target of genocide[3]; and allowed the voyage of a naval force to the South China Sea to go forward. 

            On the surface, there is much to like about Biden’s assertion of traditional forms of American power.  At the same time, previous practitioners would warn that it is all too easy to get into an escalating cycle of actions.[4]    

            If Zi wants tough action and not just tough talk, he could order some kind of military demonstration.  Perhaps China could whack the Indians along their common border, as they did in late January, or fly war planes into Taiwan’s air defense zone, as they also did.  The trouble is that such action might bring forth some new action by the Americans.  This, in turn, would require some further response.

The alternative of doing nothing but talk tough in response would be tricky for Zi Jinping.  It could signal weakness or uncertainty to people inside and outside China.  Zi could easily survive foreign perceptions, because he could calmly wait on the growth of Chinese power while looking for safe opportunities to demonstrate it.  Could he survive domestic perceptions of weakness?  Is he sure enough of his position?  Are his rivals sufficiently contained, his enemies imprisoned?[5]  In this case, a renewed round of domestic repression would serve a dual purpose.  On the one hand, it would offer a chance to weed out suspected weak links and dissidents.  On the other hand, human rights is now an entrenched American foreign policy concern.  So, domestic brutality would be both a way of shoring up Zi’s own position while openly defying one of American foreign policy’s stated goals.  What are the Americans going to do about it?  Sovereign countries can pretty much get away with doing whatever they want inside their own borders.  It’s one of the privileges of sovereignty. 

One might expect that Zi will opt for a policy of domestic toughness, notably against any “nationalists” who questions his toughness abroad.  Meanwhile, the US and the PRC probably will continue strengthening their positions.  Perhaps they will find a way out. 


[1] Climate change first of all, but then human rights, migration, and—now—pandemic disease. 

[2] Walter Russell Mead, “Can Biden Find Clarity on China and Russia?” WSJ, 14 December 2020; Mead, “Biden’s Opening Salvo on Beijing,” WSJ, date misplaced. 

[3] Biden had said the same thing on the campaign trail before his election. 

[4] For a scary, real-world example, see: https://www.youtube.com/watch?v=ef7f9v2HEl0 

[5] In all fairness, it usually took a long series of reverses before a Chinese emperor was said to have lost the “Mandate of Heaven.” 

The Asian Century 17b.

Yet, for historians—if not for political scientists or economists—there is reason for cautious optimism.  On the one hand, the historical record suggests that democracies can be slow to mobilize their strength, but better able to mobilize that strength over the long haul.[1]  If one looks at (or, much worse, had to live through) the period from 1930 to 1942, one could easily believe that the liberal system had shot its bolt.  Economic depression, the collapse of new democracies, the appeasement of authoritarian nations, and military defeat slammed confidence in the Western system.  Three years later Berlin and Tokyo lay in smoking ruins. 

Second, “there’s a great deal of ruin in a nation.”[2]  The recent unpleasantness at the end of the Trump presidency led journalists and public intellectuals to invoke the example of the disputed presidential election of 1876.  Squalid as were those events, they also helped settle a period of deep division within the United States and helped bring on a long period of rising power and prosperity.[3] 

American business may be resistant to government guidance on China policy, but it is resistant to government policy on many things.  Usually, the outcome is satisfactory to most people.  American society is immensely creative and innovative.  The rapid development of two vaccines for Covid 19 demonstrate that old truth.  Conversely, the many problems with distributing the vaccine fall to the responsibility of the state and federal governments.  Hardly cause for business to defer to the state.  During the pandemic, American businesses have moved rapidly ahead with collaboration software (like Zoom), direct delivery bypassing stores, and cloud computing to manage all of it.  Compare this with the PRC’s treatment of Jack Ma, the entrepreneur who created Alibaba and Ant.  He got “disappeared” for a while after he suggested that entrepreneurial innovation outstrips old ideas.  About the subordination of business to the state for example. 

America remains remarkably open to immigration.[4]  Immigration helps off-set the aging of the native-born population, while admitting large numbers of people eager to work and to create their own futures.  In contrast, the PRC oppresses its own people and violates international agreements, like the Anglo-Chinese agreement on Hong Kong, in order to get more people to oppress.  China is not a country of voluntary immigration. 

By any standard, China’s economic progress since the death of Mao has been extraordinary in statistical terms.  However, much of that progress came from moving peasants out of low productivity rural farming and into higher productivity urban manufacturing.  The government has used subsidies, entry into the world market, and massive intellectual property theft to push China so far forward so fast.  There is good reason to wonder if the PRC has reached the limits of what can be obtained by such methods.  Just when they’ve alarmed the US. 


[1] This is a central theme of Gordon Wright, The Ordeal of Total War, 1939-1945 (1968).  It remains the best single volume history of the Second World War. 

[2] Adam Smith.  I forget where I read it, but it stuck with me. 

[3] Richard White, the author of The Republic for Which It Stands: The United States During Reconstruction and the Gilded Age, 1865-1896 (2017), would wish to qualify this view if it ever came to his attention. 

[4] In 2017, 2018, and 2019, an average of 1,085,181 people obtained lawful permanent resident status each year.  In 2013, 2014, 2015, and 2016, an average of 1,060,401 people obtained lawful permanent resident status each year.  See: https://www.dhs.gov/immigration-statistics/yearbook/2019/table1 

The Asian Century 17a.

            It is now commonly accepted that the United States (US) and the Peoples Republic of China (PRC) are strategic competitors.[1]  All eyes regard this competition, for they represent two different approaches to government and economic management.[2]  China combines an effective authoritarian government with state-managed semi-capitalism.  The US combines democracy with a regulated free market.  For the duration of the “Fifty Years War”[3] the United States represented the preferred wave of the future for an ever-growing share of the world’s population.  Is the US able to win a new competition or have essential elements of its previous strength dissolved?  Is China better able than were Nazi Germany and the Soviet Union to win a competition with the US?  It depends where you look. 

Does the Covid 19 pandemic of 2020 offer any insight into the relative positions of the US and the PRC?  The answer must be NO if examined in international perspective.[4]  Democratic Taiwan did better than the PRC; the United Kingdom did even worse than did the US in spite of doing all the things that Democrats criticized the Trump administration for not doing.  The explanation for the diversity of results may have something to do with an Asian culture of compliance with the public interest in comparison with a Western culture of asserting individual rights at the expense of the community. 

It is sad, but true that the Covid pandemic is a transitory event.  It has been deadly and disruptive in its impact, but in a year it will be history.  More fundamental issues should be alarming.  So far, China has won the trade war launched by President Trump.  During 2020 its trade surplus increased, as did the trade deficit of the US.  The Trump administration’s attack on Huawei Technologies led the PRC to pour resources into its semi-conductor industry.  American efforts to get other countries to join in exerting pressure on China signally failed.  European, South American, and Asian countries are so entranced by the promise of the China market that they seek to fill the gaps when other countries try to pressure China.[5]  Nor is American politics oriented toward pursuing a coherent industrial policy during peacetime.  One of Trump’s last acts as President was to see his efforts to encourage an American rival to Huawei come to grief.  Intel announced plans to offshore some of its chip production; while Cisco rejected government entreaties to buy either Nokia or Ericsson.  Here they put the bottom line ahead of national strategy.  One of Biden’s first acts as President was to cancel the permit for the Keystone XL pipeline.  Here he put the demands of environmentalists over the interests of America’s Canadian ally (and over those of the American construction workers who had been building the pipeline). 

Finally, Chinese news media are portraying the riot at the Capitol as proof that American democracy is crumbling.  Many, here and abroad, would agree with this grim judgement. 


[1] Greg Ip, “China Played Its Hand Well in 2020.  Will It Keep Winning?” WSJ, 23-24 January 2021. 

[2] I’m not sure how Francis Fukuyama makes sense of this development.  Apparently, Hegelianism only takes you so far.  See Fukuyama, The End of History and the Last Man Standing (1992).  Still, he’s teaching at Chicago and I’m working at an educational wide spot in the road.  So,…

[3] The struggle from 1940 to 1990 between capitalist liberal democracy and autarkic dictatorships. 

[4] See: https://ourworldindata.org/covid-cases 

[5] For example, the European Union recently concluded an agreement with China to increase investment.  In doing so, they ignored a suggestion from Jake Sullivan, then President Biden’s national security advisor-designate that they should wait. 

My Weekly Reader 16 January 2021.

            Between 1750 and 1914, what the British historian Eric Hobsbawm called the “Dual Revolution”[1] gave the West a sudden and enormous advantage over the rest of the world.  Taking advantage of this shift in the balance of world power, Western countries returned with new energy to the policy of imperialism.  By 1914, the Indian sub-continent and South East Asia had been subdued and Africa partitioned, while the rotting Ottoman and Chinese empires were next on the list.  Political control went hand-in-hand with determined effort at economic and social Westernization.  Christian missions, banks, schools, railroads and steamship lines, army posts and naval bases, mines, tropical medicine institutes, plantations, newspapers, tax collectors, and courts sprang up everywhere.[2] 

            Half a century later, those empires were gone.  How did that happen?  Many factors played a role.  The Second World War left Europe in ruins, while elevating two anti-colonial “Superpowers.”  Relatively few Westerners had gone out to run the empires.  Their sway over non-Western subjects depended heavily upon prestige, the sense that Westerners really were superior.  The Japanese victories over Westerners in British Malaya, the Dutch East Indies, French Indochina, and the American Philippines showed that non-Westerners could defeat Westerners.  After the war, European countries were preoccupied with using their limited resources for economic reconstruction and social reform.  Finally, the war had been fought by the Westerners for the cause of individual liberty, human rights, and democracy.  Faced with colonial independence movements after the war, they couldn’t say “For us, but not for you.”  

            Yet the Western collapse tells, at most, half the story.  More important is the rise of support for independence movements.  The colonial people had been no more happy to be subjugated to foreign rule than had African-Americans to be subjugated to slavery.  How to respond to the Western challenge had long divided non-Westerners—from the American Plains to Central Africa to the Ottoman Empire to East Asia.  One answer was to turn Western achievements against Western rule.  This ran from wholesale imitation of the sources of power (Japan) to the exploitation of Western political thought, like the idea of nationalism, against those who claimed to represent it (India).  Then the wars incidentally created a base of nationalists.  They did so by accelerating the creation of a middle class and a cadre of experienced military leaders.  Both groups were strongly nationalist and eager to rise. 

            Finally, there were the committed revolutionaries.[3]  Their numbers continually winnowed by the colonial police, they printed illegal newspapers and handbills, organized demonstrations and strikes, travelled within their homelands and between different empires using false documents, and sometimes led armed uprisings.  These were the men who often would take office at the hand-over of power.  They would try—with uneven success–to build new states. 


[1] In politics this meant the emergence of strong centralized nation-states ever-more based upon the support of the governed.  In economics this meant the Agricultural and Industrial Revolution, which generated immense wealth.  The political revolution began in France, the economic revolution began in England.  With the passage of time, both revolutions spread everywhere, simultaneously creating and destroying. 

[2] For a compelling view of the British Empire at its height, see James (Jan) Morris, Pax Britannica: Climax of an Empire (1968). 

[3] Tim Harper, Underground Asia: Global Revolutionaries and the Assault on Empire (2021).  See the perceptive review by Walter Russell Mead, WSJ, 13 January 2021. 

The Asian Century 16.

            At the dawning of the Cold War in Asia, the United States limited its security commitments in the region.  Holding Japan headed the list of American concerns.  The Chinese Nationalists (Kuomintang) seemed close to defeat by the Communists.  American efforts to reform or reinforce the Kuomintang, or to mediate a peace had foundered.  Nothing more could be done.  Communist victory in 1949 did not trigger an American commitment to stop further dominoes from falling.  The remnants of the Kuomintang were left to fend for themselves; American troops began to withdraw from Korea; and the Americans made clear to the French that their war in Indochina was a lost cause.[1]  Then the Korean War began (1950); Communist China intervened against the Americans; the Americans committed themselves to South Korea, Taiwan, and Indochina; and the two countries were at daggers drawn for twenty years. 

            All this suddenly changed in the 1970s.  Richard Nixon and Henry Kissinger began an “opening” to China, while post-Mao China launched a sweeping transformation of its economy and society.  That transformation accelerated after the collapse of the Soviet Union.  The United States and China appeared to develop a community of interest that would shape the future world.[2]  One of the sticking-points that had to be finessed was the fate of Taiwan.[3]  China has held to a “one China” policy that amounts to a determination to regain all the parts of traditional China that have been lost.  Chiefly this has meant Macao, Hong Kong, and Taiwan.  The United States has accepted this policy as a long-term goal while insisting that it not take place by force.  Without adequate military force to face-down the United States, China had to play the long game.  Meanwhile, protected by the United States, South Korea and Taiwan flourished. 

            It seems to some observers that we are at the beginning of a new phase.  China’s rapid economic development has permitted the once-weak country to begin projecting its power and claims.  China has engaged in a massive military build-up, expressed in a sustained campaign to gain control of the South China Sea.  It has begun reeling-in lost territories.  Macao and Hong Kong have been the first to fall.  Now Taiwan has become the focus of attention.  The loss of Taiwan would harm American national interests.  Partly the reasons are economic; partly they are diplomatic and military; taken altogether they are strategic.  Which system will dominate Asia?  Will it be the American system of democratization and an open market economy?  Will it be the Chinese system of autocratic government and a state-controlled economy? 

            Grand gestures without solid backing likely will lead to humiliating climb-downs in Asia.  “Solid backing” means military spending and alliance-revival through sustained diplomacy.  It alos means looking to the economic and technological foundations of national strength.  This grave challenge comes at a difficult time for Americans.  Donald Trump’s “America First” policies expressed, rather than caused, a pre-occupation with domestic social and economic concerns.  Seeing beyond the here-and-now will take strong leadership.  


[1] Brian Crozier, The Man Who Lost China: The First Full Biography of Chiang Kai-shek (1976); Nancy Bernkopf Tucker, Patterns in the Dust: Chinese-American Relations and the Recognition Controversy, 1949-1950 (1983); Lloyd C. Gardner, Approaching Vietnam: From World War II through Dienbienphu (1989).

[2] The omnipresent British smarty-pants Niall Ferguson coined the term “Chimerica.”  See: https://en.wikipedia.org/wiki/Chimerica 

[3] Walter Russell Mead, “Beijing Won’t Bow to Bluster,” WSJ, 12 January 2021. 

China Data.

            During the late 1980s, Judy Shelton, a researcher at the Hoover Institution, began an examination of the public documents on the Soviet Union’s budget.[1]  Communism’s centrally-planned economy had spent decades setting unreachable production targets and then hiding the failure to achieve those targets.  The huge Soviet arms build-up after the humiliation suffered at the hands of the Americans in the Cuban Missile Crisis had long term effects.  The military (the “metal-eaters” as they were called) creamed off resources that could have been devoted to either civilian consumption or investment in production.  Economic stagnation went hand in hand with mounting popular discontent behind a veneer of great military power.  Shelton concluded that massive inflationary forces were being held back by controls, but eventually the dam would burst.  In the meantime, she argued, Mikhail Gorbachev sought to stave off the disaster by obtaining Western credits and technology.[2]  As Shelton predicted, collapse followed. 

            Twenty years on another financial crisis arose in Greece.[3]  Following a historical pattern, Greece had borrowed a lot of money from foreign lenders, spent the money on a higher standard of living in the short-term without investing in higher productivity in the long-term, cooked the books to cover what they were doing for as long as possible, and then loudly bemoaned their unjust fate when the sheriff finally showed up. 

            The common thread here is that reality and perception differed widely.  Both the Soviet Union and Greece worked hard to project an image that concealed grave problems.  Only a handful of budget experts could—with much labor—discern the truth.  The reason these historical cases matter is because not everyone today is happy with the state of data from China.   

            In the eyes of one analyst,[4] it is necessary to do a lot of digging to figure out what is going on.  On the one hand, Chinese government officials and managers are under continual pressure to meet certain quantitative standards.  In this situation, “real” growth (adjusted for inflation) is more important to managers than is actual new output.  So they may tend to overstate “real” growth.  Calculating inflation is a coarse art in China when compared to Western industrial countries.  This facilitates overstating “real” growth.  In addition, the government suppresses existing, reliable data reports when they diverge too much from the government’s line.  In 2016, the government halted publication of lending to public versus private borrowers; in 2018, it halted publication of purchasing managers indexes in Guangdong province. 

            On the other hand, this manipulation of data can makes things really difficult for people who are just trying to do productive things.  Obviously, it hinders the work of foreign observers who are trying to understand and anticipate the performance of the world’s second largest economy.  However, it can have the same effect on Chinese managers struggling to run their firms.  If uncertainty about economic performance piles up year after year, there’s going to be a reckoning.  Also, this isn’t public finance, but it may be true there as well. 


[1] On Shelton, now a controversial figure and notable spoil-sport, see: https://en.wikipedia.org/wiki/Judy_Shelton   

[2] Judy Shelton, The Coming Soviet Crash: Gorbachev’s Desperate Pursuit of Credit in Western Financial Markets (1989). 

[3] Carmen M. Reinhart and Christoph Trebesch, The Pitfalls of External Dependence: Greece, 1829-2015 (2015), Brookings Papers on Economic Activity, https://www.brookings.edu/wp-content/uploads/2015/09/ReinhartTextFall15BPEA.pdf 

[4] Nathaniel Taplin, “China’s Growth Data Dazes and Confuses,” WSJ, 5 January 2021.